CLSA Premium NZ to Pay NZ$770K in Fine for AML Breaches
The broker and the regulator were fighting in court for months to settle for the penalty amount.
New Zealand‘s Financial market Authority (FMA) announced on Monday that it has received a court’s approval to imposed a total pecuniary penalty of NZ$770,000 (around $546,676) on CLSA Premium New Zealand Limited (CLSAP NZ) for the breach of anti-money laundering rules.
The Hong Kong-headquartered derivatives broker, which was previously known as KVB Kunlun, was already anticipating the penalty and sided HK$5.6 million as a provision in the first half of 2021 to cover any fine thrown at it by the Kiwi regulator.
The regulatory proceedings were first brought against the broker in June 2020 under the allegations of failing to meet obligations under the local anti-money laundering and counter financing of terrorism rules (AML/CFT).
According to the FMAs allegations, the breaches covered a total amount of NZ$49.5 million in transactions, out of which NZ$40 million came as deposits only from two clients. The due diligence failure on the part of the brokerage was tied to 12 transactions. It also failed to keep records which is mandatory under the AML/CFT Act.
The regulator initially flagged breaches in the practices of CLSA in 2014 and identified further lapses in 2018 even after the broker made improvements.
“Taken together these features suggest that KVBs due diligence non-compliance was not inadvertent; did not arise out of any misunderstanding as to its obligations; or occur as a result of erroneous advice,” the Judge stated.
“If the extremely high-value nature of two of the transactions (totaling NZD 40.8m) is added to the mix, then there is a clear inference that CDD requirements were subordinated to the continuation of KVBs relationship with high worth customers.”
CLSA already admitted to the breaches in May but disagreed with the FMA on the penalty amount, which could be around NZ$7 million. Though the regulator approached the Auckland High Court in July, asking for a NZ$1.5 million in fine, which could be cut down to NZ$1.2 million after discounts, the broker was adamant on paying only NZ$420,000.
“We welcome this ruling as it sends a strong message that there are serious consequences for firms that choose to prioritize profit over requirements under the AML/CFT regime,” said Karen Chang, FMA Head of Enforcement.